GST Implication in case of transfer of business by Prop. to LLP

[ROHIT GOEL]

Dear sir,

One of our clients is transitioning their business from a proprietorship to LLP. Since they are engaged in software exports, they usually work on advance basis and therefore have certain outstanding advances pending for billing. Further, they also have certain overseas debtors against which export was made earlier.

Now GST Law only allows exemption from GST in case of business transfer if done on going concern basis i.e as is where is basis. However, bank would not allow exports against advances being made by LLP and neither allow receipt of exports proceeds of proprietorship by LLP.

IN such scenario if these debtors or advances are not transferred, would it still qualify for GST Exemption?

[Ganeshan Kalyani]

Sir, GST is exempt only if the business as a whole or a unit of business is transferred as a going concern. Transfer includes assets as well as liabilities. In your case, in my view, exemption would not be available and tax would be applicable. I welcome the views of my experts collegue.

AI Summary

Going concern transfer required for GST exemption; omission of outstanding advances or debtors undermines exemption. GST exemption applies only where the transfer is of the business as a whole as a going concern, requiring transfer of both assets and liabilities; if outstanding advances or overseas debtors are not transferred, the transaction does not qualify for the exemption and GST becomes applicable.